Parklane Hosiery Company, Inc v. Shore, No. 77-1305

CourtUnited States Supreme Court
Writing for the CourtSTEWART
Citation58 L.Ed.2d 552,99 S.Ct. 645,439 U.S. 322
PartiesPARKLANE HOSIERY COMPANY, INC., et al., Petitioners, v. Leo M. SHORE
Docket NumberNo. 77-1305
Decision Date09 January 1979

439 U.S. 322
99 S.Ct. 645
58 L.Ed.2d 552
PARKLANE HOSIERY COMPANY, INC., et al., Petitioners,

v.

Leo M. SHORE.

No. 77-1305.
Argued Oct. 30, 1978.
Decided Jan. 9, 1979.
Syllabus

Respondent brought this stockholder's class action in the District Court for damages and other relief against petitioners, a corporation, its officers, directors, and stockholders, who allegedly had issued a materially false and misleading proxy statement in violation of the federal securities laws and Securities and Exchange Commission (SEC) regulations. Before the action came to trial the SEC sued the same defendants in the District Court alleging that the proxy statement was materially false and misleading in essentially the same respects as respondent had claimed. The District Court after a nonjury trial entered a declaratory judgment for the SEC, and the Court of Appeals affirmed. Respondent in this case then moved for partial summary judgment against petitioners, asserting that they were collaterally estopped from relitigating the issues that had been resolved against them in the SEC suit. The District Court denied the motion on the ground that such an application of collateral estoppel would deny petitioners their Seventh Amendment right to a jury trial. The Court of Appeals reversed. Held :

1. Petitioners, who had a "full and fair" opportunity to litigate their claims in the SEC action, are collaterally estopped from relitigating the question of whether the proxy statement was materially false and misleading. Pp. 648-652.

(a) The mutuality doctrine, under which neither party could use a prior judgment against the other unless both parties were bound by the same judgment, no longer applies. See Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788. Pp. 648-650.

(b) The offensive use of collateral estoppel (when, as here, the plaintiff seeks to foreclose the defendant from litigating an issue that the defendant has previously litigated unsuccessfully in an action with another party) does not promote judicial economy in the same manner that is promoted by defensive use (when a defendant seeks to prevent a plaintiff from asserting a claim that the plaintiff has previously litigated and lost against another defendant), and such offensive use may also be unfair to a defendant in various ways. Therefore, the general rule should be that in cases where a plaintiff could easily have joined in the

Page 323

earlier action or where the application of offensive estoppel would be unfair to a defendant, a trial judge in the exercise of his discretion should not allow the use of offensive collateral estoppel. Pp. 650-652.

(c) In this case, however, the application of offensive collateral estoppel will not reward a private plaintiff who could have joined in the previous action, since the respondent probably could not have joined in the injunctive action brought by the SEC. Nor is there any unfairness to petitioners in such application here, since petitioners had every incentive fully and vigorously to litigate the SEC suit; the judgment in the SEC action was not inconsistent with any prior decision; and in the respondent's action there will be no procedural opportunities available to the petitioners that were unavailable in the SEC action of a kind that might be likely to cause a different result. Pp. 651-652.

2. The use of collateral estoppel in this case would not violate petitioners' Seventh Amendment right to a jury trial. Pp. 652-655.

(a) An equitable determination can have collateral-estoppel effect in a subsequent legal action without violating the Seventh Amendment. Katchen v. Landy, 382 U.S. 323, 86 S.Ct. 467, 15 L.Ed.2d 391. Pp. 652-653.

(b) Petitioners' contention that since the scope of the Seventh Amendment must be determined by reference to the common law as it existed in 1791, at which time collateral estoppel was permitted only where there was mutuality of parties, is without merit, for many procedural devices developed since 1791 that have diminished the civil jury's historic domain have been found not to violate the Seventh Amendment. See, e. g., Galloway v. United States, 319 U.S. 372, 388-393, 63 S.Ct. 1077, 87 L.Ed. 1458. Pp. 653-654.

565 F.2d 815, affirmed.

Jack B. Levitt, New York City, for petitioners.

Samuel K. Rosen, New York City, for respondent.

Page 324

Mr. Justice STEWART delivered the opinion of the Court.

This case presents the question whether a party who has had issues of fact adjudicated adversely to it in an equitable action may be collaterally estopped from relitigating the same issues before a jury in a subsequent legal action brought against it by a new party.

The respondent brought this stockholder's class action against the petitioners in a Federal District Court. The complaint alleged that the petitioners, Parklane Hosiery Co., Inc. (Parklane), and 13 of its officers, directors, and stockholders, had issued a materially false and misleading proxy statement in connection with a merger.1 The proxy statement, according to the complaint, had violated §§ 14(a), 10(b), and 20(a) of the Securities Exchange Act of 1934, 48 Stat. 895, 891, 899, as amended, 15 U.S.C. §§ 78n(a), 78j(b), and 78t(a), as well as various rules and regulations promulgated by the Securities and Exchange Commission (SEC). The complaint sought damages, rescission of the merger, and recovery of costs.

Before this action came to trial, the SEC filed suit against the same defendants in the Federal District Court, alleging that the proxy statement that had been issued by Parklane was materially false and misleading in essentially the same respects as those that had been alleged in the respondent's complaint. Injunctive relief was requested. After a 4-day

Page 325

trial, the District Court found that the proxy statement was materially false and misleading in the respects alleged, and entered a declaratory judgment to that effect. SEC v. Parklane Hosiery Co., 422 F.Supp. 477. The Court of Appeals for the Second Circuit affirmed this judgment. 558 F.2d 1083.

The respondent in the present case then moved for partial summary judgment against the petitioners, asserting that the petitioners were collaterally estopped from relitigating the issues that had been resolved against them in the action brought by the SEC.2 The District Court denied the motion on the ground that such an application of collateral estoppel would deny the petitioners their Seventh Amendment right to a jury trial. The Court of Appeals for the Second Circuit reversed, holding that a party who has had issues of fact determined against him after a full and fair opportunity to litigate in a nonjury trial is collaterally estopped from obtaining a subsequent jury trial of these same issues of fact. 565 F.2d 815. The appellate court concluded that "the Seventh Amendment preserves the right to jury trial only with respect to issues of fact, [and] once those issues have been fully and fairly adjudicated in a prior proceeding, nothing remains for trial, either with or without a jury." Id., at 819. Because of an inter-circuit conflict,3 we granted certiorari. 435 U.S. 1006, 98 S.Ct. 1875, 56 L.Ed.2d 387.

Page 326

I

The threshold question to be considered is whether, quite apart from the right to a jury trial under the Seventh Amendment, the petitioners can be precluded from relitigating facts resolved adversely to them in a prior equitable proceeding with another party under the general law of collateral estoppel. Specifically, we must determine whether a litigant who was not a party to a prior judgment may nevertheless use that judgment "offensively" to prevent a defendant from relitigating issues resolved in the earlier proceeding.4

Collateral estoppel, like the related doctrine of res judicata,5 has the dual purpose of protecting litigants from the burden of relitigating an identical issue with the same party or his privy and of promoting judicial economy by preventing needless litigation. Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 328-329, 91 S.Ct. 1434, 1442-1443, 28 L.Ed.2d 788. Until relatively recently, however, the scope of collateral estoppel was limited by the doctrine of mutuality of parties. Under this mutuality doctrine, neither party could use a prior judg

Page 327

ment as an estoppel against the other unless both parties were bound by the judgment.6 Based on the premise that it is somehow unfair to allow a party to use a prior judgment when he himself would not be so bound,7 the mutuality requirement provided a party who had litigated and lost in a previous action an opportunity to relitigate identical issues with new parties.

By failing to recognize the obvious difference in position between a party who has never litigated an issue and one who has fully litigated and lost, the mutuality requirement was criticized almost from its inception.8 Recognizing the validity of this criticism, the Court in Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, supra, abandoned the mutuality requirement, at least in cases where a patentee seeks to relitigate the validity of a patent after a federal court in a previous lawsuit has already declared it invalid.9 The

Page 328

"broader question" before the Court, however, was "whether it is any longer tenable to afford a litigant more than one full and fair opportunity for judicial resolution of the same issue." 402 U.S., at 328, 91 S.Ct., at 1442. The Court strongly suggested a negative answer to that question:

"In any lawsuit where a defendant, because of the mutuality principle, is forced to present a complete defense on the merits to a claim which the plaintiff has fully litigated and lost in a prior action, there is an arguable misallocation of resources. To the extent the defendant in the second suit may not win by asserting, without...

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4102 practice notes
  • Justice Department, Antitrust Division,
    • United States
    • Federal Register March 18, 2002
    • March 18, 2002
    ...1001 (1983) Massachusetts School of Law at Andover, Inc. v. United States, 118 F.3d 776 (D.C. Cir. 1997) Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979) Pennsylvania Department of Corrections v. Yeskey, 524 U.S. 206 (1998) Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367 (1992) Soren......
  • In re GEO Specialty Chems. Ltd., Case No.: 04–19148(RG) (Jointly Administered)
    • United States
    • U.S. Bankruptcy Court — District of New Jersey
    • December 4, 2017
    ...the same party or his privy and of promoting judicial economy by preventing needless litigation." Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 326, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979).The Supreme Court has also held that pursuant to the full faith and credit statute, 28 U.S.C. § 1738,......
  • E. Associated Coal Co. v. Director, No. 13-1553
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    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • July 3, 2014
    ...from relitigating an issue previously decided in its favor in a suit involving another plaintiff. See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n.4 (1979). It is only in the latter category -- where a party to a prior judgment seeks to bind a nonparty to that judgment in a subsequent......
  • Trujillo v. Rio Arriba Cnty. ex rel. Rio Arriba Cnty. Sheriff's Dep't, No. CIV 15-0901 JB/WPL
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • December 19, 2016
    ...on the same cause of action.'" Roybal v. City of Albuquerque, 2009 U.S. Dist. LEXIS 45663, at *5 (quoting Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n.5 (1979)). "Under Tenth Circuit law, claim preclusion applies when three elements exist: (1) a final judgment on the merits in an earl......
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4108 cases
  • In re GEO Specialty Chems. Ltd., Case No.: 04–19148(RG) (Jointly Administered)
    • United States
    • U.S. Bankruptcy Court — District of New Jersey
    • December 4, 2017
    ...the same party or his privy and of promoting judicial economy by preventing needless litigation." Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 326, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979).The Supreme Court has also held that pursuant to the full faith and credit statute, 28 U.S.C. § 1738,......
  • E. Associated Coal Co. v. Director, No. 13-1553
    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • July 3, 2014
    ...from relitigating an issue previously decided in its favor in a suit involving another plaintiff. See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n.4 (1979). It is only in the latter category -- where a party to a prior judgment seeks to bind a nonparty to that judgment in a subsequent......
  • Trujillo v. Rio Arriba Cnty. ex rel. Rio Arriba Cnty. Sheriff's Dep't, No. CIV 15-0901 JB/WPL
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • December 19, 2016
    ...on the same cause of action.'" Roybal v. City of Albuquerque, 2009 U.S. Dist. LEXIS 45663, at *5 (quoting Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n.5 (1979)). "Under Tenth Circuit law, claim preclusion applies when three elements exist: (1) a final judgment on the merits in an earl......
  • Federal Skywalk Cases, In re, Nos. 82-1181
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • June 7, 1982
    ...a plaintiff by relying on an earlier verdict in a suit to which the plaintiff was not a party. See, e.g., Parklane Hosiery Co. v. Shore, 439 U.S. 322, 327 n.7, 99 S.Ct. 645, 649 n.7, 58 L.Ed.2d 552 5 Punitive damages may be limited here either by Missouri law, constitutional due process, or......
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    • JD Supra United States
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    ...(1897).3. See Comair Rotron, Inc. v. Nippon Densan Corp., 49 F.3d 1535, 1537 (Fed. Cir. 1995).4. See Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 326 (1979).5. See 35 U.S.C. § 315(e).6. Id.7. Id.8. U.S. Ethernet Innovations, LLC v. Texas Instruments Inc., 645 Fed. Appx. 1026, 1030 (Fe......
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    ...a state-court judge after a bench trial in earlier false-advertising and unfair-competition litigation. In Parklane Hosiery Co. v. Shore, 439 U.S. 322, 330–31 (1979), the Supreme Court identified four non-exhaustive factors that federal courts should consider when determining whether applic......
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  • Rethinking the Supreme Court’s Interstate Waters Jurisprudence
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    • Georgetown Environmental Law Review Nbr. 33-2, January 2021
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    ...Restatement (2d) Judgments § 29(2) (1982); see Montana v. United States, 440 U.S. 147, 164 n.11 (1979); Parklane Hosiery Co. v. Shore, 439 U.S. 322, 330–31 & n.16 (1979). 2021] INTERSTATE WATERS JURISPRUDENCE 289 water rights may extend upstream or down, but only if they are consistent with......
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